Of Course, Auto Insurance Prices Matter

Isn’t it time to get the crooks off your books?

When it comes to shopping for auto insurance policies, it should come as no surprise that the overriding concern for most insurance policyholders is price. Yes, they care about whether an insurer will pay a claim or not. Yes, they care about service. But, when purchasing insurance, most people shop for price. If they didn’t, comparative raters would not exist.

Insurance Prices Are on the Rise

Pricing has been relatively steady for years because insurers have released reserves that were considered redundant. But, according to Dowling & Partners, this appears to be over for many insurers. In fact, according to the federal government’s Consumer Price Index for policy rate activity, price increases seen in April 2016 represented the largest year-over-year increase since October 2003, when motor vehicle insurance prices rose 7.2 percent. Now, insurers face risk assessment and pricing issues as reserve releases fail to support lower prices. Rising prices coupled with the increase in people willing to shop auto insurance, and you have the ingredients for an increase in garaging fraud.

Fool Me Once . . . Shame on Me

That brings me to the liars that evade proper risk assessment and prices by lying about their garaging address. If you think about it, it’s clear that these “liars” benefit from inappropriately heavily discounted policies. And if these liars were driven from portfolios, that would clear the way for the good risks to enjoy lower premiums. As a result, carriers that reward the good risks and drive the bad risks out, would enjoy growth and profitability.

That said, many insurers believe these are profitable risks – even with the heavy discount. So they are loath to chase the premium away. If this is true, I would suggest the following:

The rating tables are wrong since they are designed to price for risk based on location.

Insurers should advertise and offer steep discounts for liars as a preferred rating class since they are much better risks.

When Someone Shows You Who They Are, Believe Them

Here’s what I believe, and what our tests show. Liars lie. Liars are a bad risk and an impediment to providing good rates to good risks. Liars are a bad risk because they are willing to lie. Does this sound familiar?

Insure a liar: You lose the premium. So you’ve already lost money.

Insure your good risks at a higher rate: Good risks pay higher rates to make up for the liars.

Good risks shop better rates: You lose those good risks or they may be more likely to take advantage of claim opportunities to make ends meet. You lose more money.

Get the Crooks Off Your Books

Rising prices will create more liars and those liars will mean more risk. Carriers ready to get the crooks off their books are looking for alternatives to telematics. One of those alternatives is DRN’s vehicle location data gathered from over 4 billion nationwide license plate sightings, plus 140 million more added monthly. With DRN’s Garage Aware insurers can search by either license plate or VIN. Garage Aware then applies analytics to the license plate sighting data to compare the sightings with the reported address to help answer the question, “Is there a pattern of the insured’s vehicle parked at a location other than the reported address?” And if Garage Aware shows that garaging fraud is probable, you can investigate further using DRN’s SIU platform, Event Links, powered by our vehicle location data.

As Vice President of Risk Solutions, Alex is responsible for developing the Insurance Market for DRN. He brings experience in international sales and executive management, as well as 25 years of experience in the insurance industry leading many successful sales startups and financial turnarounds.